Duopoly can also be examined experimentally as a market, with two
sellers and several buyers. This page describes a duopoly market
that is similar to the
duopoly game, except
that rather than a constant marginal cost for the sellers, the
duopoly market example that we develop has marginal costs that
increase. This change is introduced so that it will be easier to
compare duopoly to a standard example of a competitive market and
also to a standard example of a monopoly market.

Figure 1: Duopoly price and quantity are between monopoly and
competition.

Figure 1 shows the monopoly price and quantity and the competitive price
and quantity for experiments with the same marginal cost schedules and
marginal value schedules that we use in our duopoly market experiment.
By using the same marginal cost and marginal value schedules, we can
make a direct comparison between these three different market
structures.

From the diagram we can see that the competitive price is pc
= 24 and the competitive quantity is qc = 20, 21, or 22.
The monopoly price and quantity for these marginal cost and value
schedules are worked out on the monopoly page. The monopoly price is
pM = 32 and the monopoly quantity is qM =
14.

For this duopoly market, there is an argument included on the page
with the experiment configuration which shows that the duopoly price
and quantity for these margainal cost and value schedules are
approximately pD = 28 and qD = 17.

Duopoly Market Experiment Configurations

Experiments on the duopoly market model are included in MarketLink for
both the double auction and the posted offer auction. If you haven't
yet used MarketLink to run an experiment, go to the
MarketLink page for information. If you are familiar with
MarketLink, you can add these experiments to you profile from the
duopoly market experiment configurations page.